The Parol Evidence Rule
Forget Blue State/Red State, New Jersey is an Egg State
by James J. Ferrelli and Eric D. Frank
W
hich came first, the chicken or the
extrinsic evidence be barred because a writing provides the
egg? This age-old causality dilem-
best indicator of the intentions of the parties or is extrinsic
ma dates back to ancient philoso-
evidence necessary to determine whether a writing provides a
phers, but can also be viewed as a
clear indicator of the intentions of the parties—may never
metaphor for the debate over the
come, it is clear that New Jersey has chosen the latter.
breadth of the parol evidence rule.
Ah, the parol evidence rule. Its mere mention plagues
The Chicken Argument
many lawyers with nightmares from the first year of law
If a writing appears to be a complete expression of the par-
school. As Professor John Henry Wigmore has observed, while
ties’ agreement, it is a complete integration, and extrinsic evi-
the parol evidence rule is easily framed, it “is attended with
dence should be barred to explain any such terms that are
confusion and obscurity which makes it the most discourag-
clear and unambiguous. Professor Samuel Williston’s
ing subject in the whole field of evidence.”1
approach is often referred to as the four corners rule or the
The ‘chicken’ approach to contract interpretation would
plain meaning rule. This approach suggests that the written
suggest a restrictive application of the parol evidence rule that
memorialization is the best interpretation of the intent of the
focuses upon the final, written agreement. A clear and unam-
parties. Thus, if terms can be deciphered by reviewing the
biguous writing is the best identifier of the intentions of par-
writing without ambiguity, no further investigation is neces-
ties who agreed to be bound by the terms of that writing,
sary and extrinsic evidence should be barred.3
right?
This limited view of the parol evidence rule does allow for
The ‘egg’ approach, on the other hand, would suggest a
the introduction of parol evidence only if it would be natural
more expansive view of the parol evidence rule incorporating
to enter into a separate agreement regarding additional terms.
all of the circumstances that resulted in the final, written
Such a writing is considered a partial integration, and parol
agreement. How can one determine what is clear and what is
evidence is therefore necessary to understand the entire agree-
unambiguous without first understanding what exactly each
ment between the parties.
party’s intent was when entering into the agreement, as well
as the surrounding circumstances that place the terms of that
written document into their proper context?
The Egg Argument
At the other end of the spectrum sits Professor Arthur L.
Ironically, the parol evidence rule’s name itself is not free
Corbin’s view, which provides that any evidence that sheds
from ambiguity. First, the parol evidence rule applies to all
light upon the meaning of a contract should be considered
forms of extrinsic evidence, and is not limited to oral, or
admissible evidence. Under Corbin’s view, determining
parol, evidence. Second, a “rule” is defined as “[o]ne of a set
whether the language contained in a writing is ambiguous or
of explicit or understood regulations or principles governing
not first requires a look at extrinsic evidence surrounding that
conduct within a particular activity or sphere.”2 On the con-
writing.4
trary, the parol evidence rule is not explicit and has resulted
in various competing interpretations.
Although a universal answer to the question—should
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NEW JERSEY LAWYER | December 2012
New Jersey is an Egg State
New Jersey has long been an egg state, following Professor
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Corbin’s approach. Plainly stated, New
intent that ordinarily all surrounding
Jersey recognizes that extrinsic evidence
Jersey’s expansive view of the parol evi-
circumstances and conditions must be
is “adducible only for the purpose of
dence rule is “[e]vidence of the circum-
examined before there is any trustwor-
interpreting the writing—not for the
stances is always admissible in aid of the
thy assurance of derivation of contrac-
purpose of modifying or enlarging or
interpretation of an integrated agree-
tual intent.”11
curtailing its terms.”18 The parol evidence rule comes into play to prohibit
ment,” even when the contract on its
face is free from ambiguity.5
In Atl. Ne. Airlines v. Schwimmer, the
Conway v. 287 Corporate Center
Associates
the introduction of extrinsic evidence to
vary the terms of the contract.19
Supreme Court set forth its reasoning
The New Jersey Supreme Court’s
Furthermore, under the cases, the
with a correlation to the chicken and
most recent definitive statement of its
courts will also not allow the introduc-
egg dilemma. “What [a document] was
expansive view of the parol evidence
tion of extrinsic evidence where the evi-
intended to cover cannot be known till
rule came in 2006 in Conway v. 287 Cor-
dence is offered to show an outrageous
we know what there was to cover.”6 In
porate Center Associates.12 In Conway, the
interpretation of a contract provision.
direct
plaintiff attorney sought a declaration
As one court explained, the extrinsic
of his contractual rights related to a
evidence “must be one which the writ-
bonus provision of a retainer agreement
ten words will bear.”20
contrast
to
the
Williston
approach, the Court explained:
The writing is not wholly and intrinsi-
with his client. The defendant client
13
cally self-determinative of the parties’
wished to offer extrinsic evidence to
Merger Clauses under New Jersey Law
intent to make it the sole memorial of
show that certain triggering events
Merger clauses, also referred to as
the subject of negotiation; this intent
negotiated in connection with the
integration clauses, are often used as a
must be sought...in the conduct and
bonus provision were not met.14
contractual tool to limit New Jersey’s
language of the parties and the sur-
The Court, following its Schwimmer
expansive view on extrinsic evidence.
rounding circumstances. The docu-
precedent, held that extrinsic evidence
They are used to expressly state that a
ment alone will not suffice…The ques-
may always be examined to achieve the
written document sets forth the final
tion being whether certain subjects of
ultimate goal of discovering the intent
embodiment of the parties’ agreement,
negotiation were intended to be cov-
of the parties, noting that “the words of
and to exclude any evidence of prior
ered, we must compare the writing
the contract alone will not always con-
negotiations regarding the agreement in
and the negotiations before we can
trol.” The Court stated that the broad
the event of a dispute.
determine whether they were in fact
use of extrinsic evidence is permitted
However, under New Jersey law, even
covered.
“to achieve the ultimate goal of discov-
the best written merger clause may not
ering the intent of the parties,” and that
be enough to bar extrinsic evidence of
7
15
Under New Jersey’s approach, “the
extrinsic evidence was admissible “to
the terms of a writing. As one court
parol evidence rule does not even come
uncover the true meaning of contractu-
explained: “[a]lthough a contract with a
into play until it is first determined
al terms.”
merger clause is strong evidence that
16
what the true agreement of the parties
In Conway, the Supreme Court enu-
the parties intended the writing to be
is—i.e., what they meant by what they
merated several types of extrinsic evi-
the complete and exclusive agreement
wrote down.”8 In Garden State Plaza
dence helpful to determine the true
between them, it is not dispositive.”21
Corp. v. S. S. Kresge Co., the defendant
intentions of the parties. This includes
lessee sought to introduce extrinsic evi-
evidence
contemporaneous
eign corporation brought an action
dence regarding negotiations surround-
actions of the parties; 2) the bargaining
against a Delaware corporation, in part,
ing a commercial lease to bar the plain-
history between the parties; 3) custom
for alleged breaches of two separate pur-
tiff’s demand that the defendant pay a
usage of certain terms; and 4) the inter-
chase agreements.22 In its motion to dis-
maintenance fee. The trial court barred
pretation placed on the disputed provi-
miss, the defendant argued that the
the evidence, finding it inadmissible
sion by the parties’ own conduct.
merger clauses of the purchase agree-
9
of:
1)
17
ments established the clear relationship
under the parol evidence rule.10
On appeal, the court found that “all
relevant evidence pointing to meaning
Limitations Under New Jersey’s
Approach
is admissible because experience teaches
While New Jersey takes a broad
that language is so poor an instrument
approach to extrinsic evidence, the law
for communication or expression of
is not entirely without limitation. New
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In S. Megga Telecommunications, a for-
between the parties, and that prior or
contemporaneous
oral
agreements
between the parties should be barred
under the parol evidence rule.23
Denying the motion to dismiss, the
NEW JERSEY LAWYER | December 2012
9
court sided with the plaintiffs and held
time to time between a red state and blue
Magazine Editorial Board and a past
that Schwimmer was controlling, and the
state, what is clear is that when it comes
trustee of the New Jersey State Bar Associa-
intent of the parties should not be deter-
to the parol evidence rule, New Jersey
tion. Eric D. Frank, an associate in the
mined solely by reference to the four
consistently remains an egg state.
trial department of Duane Morris LLP, is
corners of the written agreement, even
resident in its Cherry Hill office, and con-
when the contract on its face is free
Endnotes
centrates his practice in complex business
from ambiguity (i.e., where the contract
1.
9 Wigmore on Evidence § 2400, at 4
and commercial litigation, gaming and reg-
(Chadbourn rev. 1981).
ulatory matters.
included an express merger clause).
24
The court added that “although a con-
2.
Oxford Dictionary of English, 2010.
tract with a merger clause is strong evi-
3.
See Conway v. 287 Corporate Center
dence that the parties intended the writ-
Associates, 187 N.J. 259, 268 (2006).
ing to be the complete and exclusive
4.
See Id. at 268-269.
agreement between them, it is not dis-
5.
Atl. Ne. Airlines v. Schwimmer, 12 N.J.
positive.”
293, 301 (1953).
25
From a practical standpoint, New Jer-
6.
Id. at 304.
sey’s status as an ‘egg’ state has an
7.
Id.
important ramifications in both transac-
8.
Garden State Plaza Corp. v. S. S. Kres-
tional and litigation matters.
ge Co., 78 N.J. Super. 485, (App. Div.
In transactions, the nature of New
1963).
Jersey’s parol evidence rule means that
9.
contracting parties and their counsel
10. Id. at 491.
need to take greater care to include spe-
11. Id. at 496.
cific, detailed contractual provisions in
12. 187 N.J. 259 (2006).
Id. at 489.
their final written agreements. The
13. Id. at 265-266.
greater the specificity in the written
14. Id. at 267.
contract, the better the argument in the
15. Id. at 270.
event of a dispute that oral testimony
16. Id.
on the specific issue is contradictory of
17. Id. at 269.
the written terms of the document, not
18. Atl. Ne. Airlines v. Schwimmer, 12 N.J.
explanatory.
In litigated contract cases, New Jersey’s parol evidence rule opens up a
broader scope of relevant evidence pertaining to the interpretation of the con-
at 302.
19. Conway v. 287 Corp. Ctr. Assocs., 187
N.J. at 270.
20. Garden State Plaza Corp. v. S. S. Kresge Co., 78 N.J. Super. at 497.
tract, the circumstances surrounding
21. S. Megga Telecommc’s Ltd. v. Lucent
the parties’ contract, and the parties’
Techs., Inc., No. 96-357-SLR, 1997
understanding and intention at the
U.S. Dist. LEXIS 2312 (D.N.J. Feb.
time the contract was entered. Further,
14, 1997).
the relevance of such topics to the inter-
22. Id. at *5.
pretation of the contract at issue under
23. Id.
New Jersey law makes obtaining sum-
24. Id. at *22.
mary judgment based upon the plain
25. Id. at *22-23.
language of the contract even more
challenging. The contract might not
James J. Ferrelli, a partner in the trial
mean exactly what the plain language
department of Duane Morris LLP, is resi-
appears to say, depending upon the sur-
dent in its Cherry Hill office, and concen-
rounding circumstances and other indi-
trates his practice primarily in the areas of
cia of the parties’ intent, which are a
complex business and commercial litiga-
proper subject of oral testimony.
tion, products liability, and class actions.
While New Jersey may waffle from
10
NEW JERSEY LAWYER | December 2012
He is the chair of the New Jersey Lawyer
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